James A. Morrissey, Washington Correspondent

The US government's annual special report on the adequacy and effectiveness of intellectual
property rights protection (IPR) shows some improvements among US trading partners, but for the
first time Canada is on the Priority Watch List, and problems continue with China, Russia and a
number of other countries.

The report reviewed trade with 77 nations, with 46 being placed on the Priority Watch List or
a lower-level monitoring list. The US Trade Representative (USTR) said 12 countries on the Priority
Watch List will be "the subject of particularly intense engagement through bilateral discussions
during the coming year."

Underscoring the importance of the report, USTR Ron Kirk said: "As US rights holders,
businesses and workers suffer losses from international piracy, counterfeiting and other forms of
IPR theft, the Special 301 Report provides a critical policy tool for focusing on urgent
problems that undermine one of America's great strengths in the global economy - our
innovation and creativity. In this time of economic uncertainty, we need to redouble our
efforts to work with all of our trading partners - even our closest allies and neighbors such as
Canada - to enhance protection and enforcement of intellectual property rights in the context of a
rules-based trading system."

For the first time, Canada was added to the priority list, reflecting increasing concern
about the need for copyright reform as well as border protection.

While noting that China and Russia have shown "some evidence of improvement," Kirk said, "I
am particularly troubled by reports that Chinese officials are urging more lenient enforcement of
IPR laws, motivated by the financial crisis and the need to maintain jobs." He added that China
needs to strengthen its approach to IPR protection and enforcement, not weaken it. With respect to
Russia, Kirk said the United States is committed to ensuring that Russia fulfills its promises to
improve its IPR protection and enforcement regimes as part of a bilateral agreement with the United
States.

Algeria and Indonesia were added to the Priority Watch List, reflecting growing concerns
about IPR protection in those countries, but South Korea was removed from the Watch List in view of
what the USTR said were "significant improvements" made during the past year. This marks the first
time that Korea has not been on the Watch List or the Priority Watch List.

In addition to Canada, Russia, China, Algeria and Indonesia, other countries on the Priority
Watch List are Argentina, Chile, India, Israel, Pakistan, Thailand, and Venezuela.

In a filing with the USTR, the American Apparel and Footwear Association (AAFA) said footwear
and apparel amounted to 38 percent and 9 percent, respectively, of the total value of counterfeit
products seized by US Customs officials last year. The association said last year Chinese
counterfeit products accounted for 81 percent of the total value of all goods seized by Customs.

AAFA President and CEO Kevin Burke said: "IPR infringements in China run the gamut in the
apparel and footwear industry with copyright and trademark infringement as two leading areas of
concern." He also cited counterfeit labels and packaging, manufacturing of counterfeit products and
retail counterfeit trade as problems. He called for criminal and civil justice reform and better
customs training.
May 5, 2009